From Seed Through Harvest… Cultivating Financial Success

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    Investors can always find a way to make money

    To be sure, you have always thought that investors can find a way to make money even in the worst imaginable market. For the past few years, we’ve been in just such a market — and that is why we look to mitigate a good degree of absolute risk through our QuantaFundaTechna strategy. (TDI Managed Growth Portfolio)

    So while many advisors have brainwashed investors into believing it’s possible to make money only when stocks move higher, don’t believe it. It’s simply not true.

    From August, 2008 through February, 2009, I turned a profit both in real life and with a model portfolio on MSN Money in the Strategy Lab stock-picking game. As a clearer example, during a brutal bear market, my MSN Strategy Lab portfolio finished ahead by more than 14%, while the S&P 500 Index ($INX) was down 35%. (This is a good way to see how we actually manage money as it is public, transparent and we can report on it to the public)

    The process we used can be summed up in for use with professional and individual investors:

    • Be disciplined. Set a price to buy and a price to sell whenever you make a move, and stick to them. Don’t get attached to any stock. Don’t waiver.
    • Be nimble. Lazy portfolios do not make it in a market like this. Everyday investors are often told not to trade and particularly not to sell-short. In a tough market, you have to move fast and sometimes go against the crowd.
    • Be flexible. Refuse to be forced into a single strategy. Over the decades and specifically since 2007 , opportunities were found in unusual places. In fact, we  shorted municipal bonds, bought preferred stocks and even shorted leveraged inverse ETFs. Not the usual

    In short, find a system that works and stick to it… As long as it works. From there, be flexible and open to a changing market condition.

    Serious money

    Even though I started Strategy Lab with $100,000 in “fake money,” I treated it like it was my own and managed it as I would real dollars. While that was a great way for us to allow the world to peek into our process, we manage client money with the same strategies.

    Truth be told, even though we have been managing money for 20 years+, the MSN Strategy Lab really put our strategies to the test and with the disciplines that I had outlined in my book, “The Disciplined Investor: Essential Strategies for Success,” were put to the test in front of millions of readers.

    The Disciplined Investor approach is straightforward: Use all of the key strategies that the professionals adhere to in analyzing stocks and markets. While most pros focus on just one, our approach uses what we believe are the best parts of each. Staying flexible while sticking to a set of predetermined rules may sound like a contradiction, but it helps an investor build profits and avoid severe losses.

    So, what is a discipline anyway? Here are the standard definitions:

    • A system of rules of conduct or method of practice.
    • The trait of being well-behaved.
    • Training to improve strength or self-control.

    It’s a process of continually educating yourself and improving your techniques. The truth is that knowledge is power, and, in the world of investing, it’s also money.

    Now, more than ever, we all need to learn to be nimble and flexible. There is no room for lazy portfolios or blindly followed tips. We can’t afford to fall in love with any one idea or one stock; cut your losses early, when they’re no more than annoyances.

    We use a process we like to call “QuantaFundaTechna” to come up with my specific investments. It involves studying stocks screens, analyzing key ratios and financial statements, and technical analysis.

    Documented results

    In the summer of 2008, I wrote about how I had approached the markets : “Overall, the idea was to hedge the portfolio, remain flexible and to have a process by which downside protection was paramount. It saved us. It was not one way or the highway.”

    Looking back, there were many reasons for the success during those difficult months, but it all comes back to the Disciplined Investor process and a sharp understanding that change is constant.